Budgeting for Beginners

Budgeting for Beginners

The trick to budgeting is to remember it’s supposed to make your life easier, not harder. You don’t have to be a financial planner to work out a budget that makes your money work for YOU. It’s easier than you may think; and you’re already taking the first step: learning how to budget. As you’ll see, budgeting helps you live comfortably within your means. It helps lessen the financial stress in your life, ensuring you have funds for emergencies, unexpected bills, and yes, even some extra fun too! With the right budgeting techniques, you can spend your money confidently and smartly track where it goes.

Why Is Budgeting Important?

When you learn how to make a budget (and follow it), you take control of your finances rather than letting your finances control you. We all know too well by now that life can be unpredictable and stressful, especially if you’re constantly worrying about paying bills or opting out of opportunities because you don’t have the extra cash. A budget helps you understand where your money is coming from and where it’s going, providing you with a blueprint for how to save money each month. The more intentional you are with your spending, the more money you’ll discover you have to put away for emergencies, college savings, retirement, or even a family fun fund.

Why is budgeting important

How Do You Make a Budget That Works for You?

A doable budget is one that’s within your means, but what does that, well, mean? Your means is essentially your income. As financial planner Michael Kitces notes, a good budget helps you spend less than you earn, so you always have money left over for savings, emergencies, or that holiday gift budget.

Living within your means requires knowing what you earn each month and what you spend each month. For many, this first budgeting step is intimidating because they’ve never paid close attention to their financial habits. But don’t worry, it’s easy to get started if you break the process down into two simple steps:

1. Determine your monthly income.

If you’re like most people, you earn your income through employment. Your spendable income is what you earn after taxes. However, you may have additional sources of income, including:

  • Second jobs or "side hustles"
  • Investment income
  • Income from family trusts or court settlements
  • Rental income
  • Royalties

Review your bank deposit statements to identify all of your income sources. Once you’ve tallied up your income for the month, you’ll have a firm grasp of what’s within your financial means.

2. Take stock of your expenses

Next comes the “hard” part: identifying and listing all of your regular expenses. This can be tricky for several reasons:

  • People may not like to face up to how they spend their money. Daily morning lattes, anyone?
  • Technology makes it easy to “set and forget” automatic debits, such as subscriptions, mobile apps, and utility bills.
  • Speaking of utility bills, they can fluctuate, making it difficult to know what to expect each month.
  • Some expenses are regular and expected but are not payable monthly. These might include taxes, license renewals, or bills for municipal services.

Begin by reviewing your bank and credit card statements and making a note of each expense. Tally these up to get a sense of your average monthly spend. For fluctuating payments like those utility bills, look at how much your costs go up or down each month. You’ll want to ensure you have some “wiggle room” in your budget for these sorts of fluctuating charges.

Once you know your means (income) and your expenses, you can begin building an accurate budget that lets you comfortably cover your needs and your wants. If you’re a budgeting beginner, one of the easiest ways to start building out your budget is by following the 50/30/20 rule.

What Is the 50/30/20 Rule?

While there are many different budgeting philosophies, the 50/30/20 rule is popular because of its practicality, flexibility, and effectiveness. According to this rule, budgeting is divvied up like so:

  • 50% of your income goes toward needs
  • 30% of your income goes toward wants
  • 20% of your income goes toward savings or debts

The trick, of course, is first understanding the differences between necessities and wants. According to financial expert Rachel Cruze, true needs are “the Four Walls: food, utilities, shelter, and transportation.” Once you set aside enough money for these budgeting categories, then you can begin assessing what falls into the “want” category.

Your wants may include family trips, movie nights, or concert tickets. You may find you enjoy cutting down on the “wants.” For instance, rather than eating out at restaurants or ordering delivery multiple nights a week, you and your family can make memories by cooking together at home.

If the 50/30/20 rule doesn’t add up to a budget that works for you, make adjustments. Maybe you’d rather put an extra 5% of your “needs” in the “want” category, or you’d like to increase your savings by 10%. This rule is a general guideline to help you get started, but you can tweak it to work for your lifestyle.

What Are the Best Tips and Tools for Budgeting?

Eager to get started with budgeting? Here are some budgeting tips for beginners, as well as tools, like our new Clever Girl Finance Budget Planner, and ideas to help get you started or to improve your current personal finance skills:

1. Check out personal finance software.

Many people find that they can manage household accounts and budgets using a basic spreadsheet program like Excel. If this works for you, great! If Excel isn’t your style, there are plenty of user-friendly apps to help you keep track of budgets and household finances. You can connect your bank and investment accounts to these apps and manage all of your accounts in one place.

2. Use the tools provided by your bank or credit card company.

Check with your bank or credit card company to learn if they offer budgeting tools that automatically assign categories to your expenses for you. These types of customizable options make it easy to tell where your money goes each month (such as rent, gym memberships, groceries, utilities, entertainment, transportation, etc.) and notify you if you overspend in a particular area of your budget.

3. Consider a paper budget planner.

According to a study reported by, you’re 42% more likely to reach your goals if you write them down. So, consider using a paper budget planner in addition to digital or electronic tools to track your budget. Writing your income, expenses, and financial habits down on paper can reduce stress while making it easier to set and reach your budgeting goals. A budget planner book is easy to carry with you in your purse or bookbag, so you can conveniently log your spending on the go. It doesn’t hurt that a paper planner can make budgeting more fun too. Grab some budget bundle journaling accessories like colorful pens and stickers to take your budget tracking to the next level.

4. Work with your spouse, partner, or other family members.

Budgeting is not a solo activity if you are living and sharing expenses with others. Get your spouse, partner, roommates, and family involved in setting up and sticking to a household budget.

5. Get an accountability partner.

If you don’t share expenses with others, consider getting a budget accountability partner. This could be a friend, family member, or even a financial professional such as a credit counselor, financial coach, or financial planner. Schedule monthly meetings to go over your budget, expenses, and progress toward your goals.

Budget Your Way to a Better Life.

Having a budget in place is one of the easiest steps you can take to make life a bit more stress-free — and be kinder to your future self. According to Dr. Austin Perlmutter, M.D., having empathy for your future self means learning to make better choices today. By budgeting and getting control of your finances today, you’re helping to prepare your future self for everything from homeownership and college tuition to unexpected emergencies and retirement. So start budgeting today to make your tomorrow even better. Your future self will thank you.